Data provide some hope in mortgage crisis

There's a glimmer of hope that the long-running foreclosure tide might be starting to ebb as fewer Maryland homeowners were reported to have missed one payment in the last quarter of 2009 - though it could take years for the crisis to be behind us.

The rate of Maryland borrowers 30 days late on payments fell 2 percent from the third quarter to the fourth, the Mortgage Bankers Association said Friday. It's only the second time the trade group has seen a fourth-quarter drop here since it began tracking the numbers in 1979 - heating bills and holiday expenses typically push delinquencies upward at the end of the year. The other fourth-quarter drop came in 2001, as the country was coming out of a recession.

"For the first time, we see some concrete good news," said Jay Brinkmann, chief economist of the Mortgage Bankers Association. "We have fewer new problems entering the system."

But the association warned that the problem remains a huge one. Though new delinquencies fell, more homeowners were getting farther behind nationwide, pushing up the total number of delinquent loans. Nearly 15 percent of all Maryland borrowers were behind on their mortgages at the end of December, including homeowners whose lenders had started foreclosure proceedings. That compares with less than 14 percent three months earlier.

This trend made state officials leery of declaring that the crisis has peaked, despite the upside of fewer new delinquencies.

"Everybody's looking to see when we've hit the bottom or turned a corner," said Clarence Snuggs, deputy secretary of the state Department of Housing and Community Development. "I'm not sure that this is, in itself, enough of a signal."

He's hoping that the drop in new delinquencies will continue, and he'd like to see more people get out of the seriously delinquent category by working out a loan modification or other solution with their lenders. As homeowners wait to hear whether they will qualify for a modified mortgage with lower payments, they generally fall further behind.

Five percent of all Maryland borrowers were in the category considered the most behind on payments and not yet facing foreclosure - at least 90 days late - at the end of December. Only nine other states had higher shares.

Maryland ranked 14th-highest for its share of borrowers facing foreclosure.

Brinkmann, with the mortgage bankers group, expects to see a continued trend of decreasing new delinquencies but stubbornly high numbers of seriously late borrowers. It tracks the job market, he said. The national unemployment rate fell in January, but months-long joblessness is a big problem.

"Unemployment is now more and more concentrated in longer-term unemployment," he said.

Nonprofit housing counselors are accustomed to hearing from homeowners only after they've been late for at least several months. Even so, Mary Warlow with Belair-Edison Neighborhoods Inc. was struck by the number of far-behind borrowers who have recently asked for help.

"In January and February, there was this rush of people calling who had [auction] sales dates," said Warlow, marketing director for the Baltimore nonprofit. "At that point, for us as housing counselors, there's very little we can do. We usually have to give out a legal referral."

Job losses and income reductions are definitely a problem for borrowers, she added. The bad news for struggling borrowers in a sagging economy is that the longer they're out of work, the fewer their options.

"Sometimes it's not realistic for them to catch back up," Warlow said.

About 220,000 Marylanders were looking for work without success in December, the most recent government figures. Snuggs, with the Maryland housing department, said the state is hearing from more people that they're exhausting their savings or retirement funds as they try to make up for job loss or wage cuts.

"The biggest opportunity - and challenge - is to get the modifications put into place to help people who are struggling, really, to hold on and get through this down period," Snuggs said. "If they can't get those payments down to a level they can afford, they're going to be faced with foreclosure."

The federal government has pressed lenders for months to modify more homeowners' mortgages. This week, Gov. Martin O'Malley urged state legislators to pass a bill requiring lenders to go into court mediation with borrowers who believe that modification - or another alternative to foreclosure - wasn't properly considered.

The Maryland court system opposes the plan. Judicial officials fear the system would be overwhelmed with requests from borrowers using mediation as a first resort, rather than a last step after working with lenders and housing counselors.

Snuggs said his hope is that mediation becomes a tool for homeowners who really should be able to avoid the auction block but need "another set of eyes to take a look."